Grow Capital Inc. (GRWC)

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Grow Condos Inc (OTCMKTS:GRWC) has been experiencing a bear run for the past 10 months.

The company, whose share price is currently trading at $.0395, begun the year at a high of $1.25 and has been going down since.

This downward trend was further exacerbated in August when their number of shares traded rise, unlike previous months, with the traded volumes hitting highs of up to 12 million on some days during this period.

All this can be seen in the chart below:

GRWC Daily Chart

The latter alludes to the fact that the company’s shares may have been oversold during this period.

Therefore, we are presenting a narrative that given the latter, the company may therefore be due for a come back going forward and that investors would benefit a lot from investing in the stock at its current low price and selling it at its expected future high price.

Over the course of this piece, we will assess the operations of GRWC and establish the value creation activities that have been undertaken by their management during the period since our last analysis.

Before then, however, let’s have a brief look at the company.

GRWC: A Brief

GrowCondos Inc is a real estate purchaser, developer & manager of specific use industrial properties providing “condo” style turn-key grow facilities to support the cannabis industry.

They currently own, lease, sell and manage properties for cannabis industry players. They finance the purchase and/or development of properties by offering to investors private placement sponsorships, debt instruments, or limited partnerships.

The company prides itself in being passionate about the growth of the dynamic cannabis industry and is working to ensure that they are part of this growth process.

Taking Part in Growth

The growth story of Grow Condos is banked heavily on the growth of the cannabis industry as a whole. This stands to benefit them quite a lot given the growth that has been experienced in the cannabis sector as a whole.

According to a report on global small cap firms, Grow Condos sales are being driven by burgeoning legal cannabis market, which stood at $7 billion in 2016 and is expected to grow at a CAGR of 25% till 2020 to reach $22 billion.

Source:

With this said, the only limit to the growth of the firm would be inability to take advantage of the opportunities in the industry.

This far, however, much has been done.

The company’s new product dubbed “Smoke on the Water” has come to revolutionize the cannabis sector by providing nature lovers the ability to enjoy cannabis in a secure and serene environment. The product will give such people the ability to smoke marijuana in ‘park-like’ environment, creating a new niche for tourists who may not be allowed to smoke marijuana in national parks.

As such, park-like establishments serve as their best grounds for this product.

Management believes that these establishments can be purchased for 4 to 7 times EBITDA, then converted into culturally themed Cannabis Friendly destinations, creating a greater industry presence with a growing multiple of franchise themed locations.

This brilliant idea has been hailed by their CEO, Wayne Zallen, who said:

“The concept that the ‘Smoke on the Water’ brings to the table is proving to be a unique and successful business model entirely suitable for an advantageous ‘roll-up’ acquisition opportunity The RV and Campground sector of the Real-Estate industry is an almost wholly exclusive niche in the industry that we are very gratified to have discovered.”

Source:

With such foresight and ‘niche-creation’ going on in the company, there is a lot of value creation expected from them. Our bullish outlook on GRWC cannot be further underscored.

Financials

The company has put in a lot of effort in growing and tidying their books.

Their annual revenues have been growing over time with the period ended June 2016 having $118,000 as compared to the $54,000 in the previous year. Moreover, their revenues are quite stable over the past quarters with the company making $26,000 in the quarter ended March 2017. Despite this being a drop by $3,000 from the previous quarter, the management remains optimistic of an increase in the coming quarters as the industry continues to grow.

In line with the above, the company recorded a net loss of $119,000 in 1Q2017 down from $310,000 in 4Q2016 and $506,000 in 3Q2016. This was courtesy of an interest income of $137,000 that was earned during the quarter, a significant jump as compared to the $20,000 earned in 4Q2017 and $19,000 in 3Q2016.

In addition to the above, they have made significant strides to ensure they boost the shareholder equity which went up from a negative position $901,000 to $466,000. Despite both positions still being negative, the halving of the position only goes to speak to the company’s position on strengthening their book values going forward.

This in addition to working at recording a profitwill go a long way in ensuring that the company’s book values are solidified as they work towards growth.

Finally, GRWC is cash flow positive.

In the first quarter of 2017, they made about $104,000 in operating cash flows. This was no mean feat for the especially when these cash flows were compared to the negative position of $349,000 recorded in the previous period.

All the above go to show that GRWC is at a pivotal position in its operating life and that its management realize this and are putting systems in place to manage this process. A lot has been done in GRWC, all which is preparing them for growth in their operations and share price performance.

Conclusion

Shares of GRWC have been oversold in the past, however, the company has made significant strides in a bid to get back up. We expect that the stock will pay off in the near future.

We will be updating our subscribers as soon as we know more. For the latest updates on GRWC, sign up below!

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Disclosure: We have no position in GRWC and have not been compensated for this article.